KOLKATA (miningweekly.com) - After failing to complete a due diligence within the schedule timeframe, Indian miner NMDC Limited was seeking an extension of its exclusive negotiating agreement with ASX- and TSX-listed Minemakers to acquire a 50% stake in its Wonarah phosphate deposits, in the Northern Territory.

The exclusive negotiating agreement between NMDC and Minemakers was slated to expire on February 20, and NMDC would make a formal request to the Australian miner for a three-month extension, later this week.

While it was not clear whether Minemakers would accede to a request for an extension, it has been learned that Minemakers was also ready to initiate talks with other investors for the development of the Wonarah deposits through a joint venture, since there has been an inordinate delay in finalising the project with NMDC, Indian largest iron-ore miner.

“The due diligence has taken too long largely because of NMDC’s lack of experience in the fertiliser industry. But we expect the company to complete the exercise in a few more weeks and would hope that Minemakers would agree to an extension of the exclusive agreement,” a Mines Ministry official said.

In June 2011, NMDC and Minemakers signed a memorandum of understanding to jointly develop the Wonarah project, one of the largest underdeveloped phosphate deposits in Australia with estimated reserves of 1.26-billion tons, at an average phosphate content of 12%. The combined investments by NMDC and Minemakers for development of the reserves had previously been estimated at $1-billion.

NMDC’s venture into phosphate mining and asset acquisitions overseas follows the Indian government prodding mining companies to ramp up supplies in view of sharply rising demand for the fertiliser raw materials in India.

Demand for rock phosphate was rising at 9% a year and forecast at 8.59-million tons by 2011/12 and 13.22-million tons by 2016/17. Of the total current demand only 2.5-million tons was sourced from domestic mines.

A slip-up in striking a deal with Minemakers for a stake in the Wonarah project would also seriously jeopardise NMDC’s plans to complete greenfield investments of $900-million by 2012/13, leveraging the company’s $3.6-billion free cash reserves. NMDC has set aside a corpus of $50-million for initial investments in the Wonarah project.
 

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